Securities and Exchange Board of India (frequently abbreviated SEBI) is the nodal agency which safeguards the interests of an investor in the Indian market.
SEBI performs three key functions: quasi-legislative, quasi-judicial and quasi-executive. It drafts regulations, conducts investigation & enforcement action and it passes rulings and orders. Even though this makes it extremely robust, there’s an appeal procedure to create accountability.
What are the Main Functions of SEBI ?
- Safeguarding the interests of investors by means of adequate education and guidance. SEBI makes rules and regulation that must be followed by the financial intermediaries like portfolio exchanges, underwriters and merchant bankers, etc. It takes care of the complaints received from investors . Additionally, it issues notices and booklets for the information, assistance and protection of small investors.
- Regulating and controlling the business on stock markets. Registration of brokers and sub-brokers is made mandatory and they have to abide by certain regulations and rules.
- Conduct inspection & inquiries of stock exchanges, intermediaries and self-regulating organizations and to take appropriate measures wherever required. This function is carried out for organized working of stock exchanges & intermediaries.
- Barring insider trading in securities.
- Prohibiting deceptive and unfair methods used by financial intermediaries operating in securities markets.
- Registering and controlling the functioning of stock brokers, sub-brokers, share transfer agents, bankers, trustees, registrars, merchant bankers, underwriters, portfolio managers, investment advisers and various other intermediaries who might be linked to securities markets in any manner.
- SEBI issue guidelines and instructions to businesses concerning capital issues. Separate guidelines are provided for initial public issue, issue by a listed companies, etc. It conducts research and publishes information beneficial to all market players (i.e. all buyers and sellers).
- SEBI regulates mergers and acquisitions as a way to protect the interest of investors. For this, SEBI has released appropriate guidelines with the intention that such mergers and takeovers won’t be at the expense of small investors.
- Registering and controlling the functioning of collective investment schemes such as mutual funds. SEBI has created regulations and guidelines that should be followed by mutual funds. The aim is to maintain effective supervision and avoid any unfair and anti-investor actions.
- Promoting self-regulatory organization of intermediaries. It has extensive legal powers. Having said that, self-regulation is preferable to external regulation. The function of SEBI is to motivate financial intermediaries to create their professional associations and manage harmful actions of their members. It can also make use of its powers when needed for protection of investors.
- Carrying out steps in order to develop the capital markets by having an accommodating approach.
- Provide appropriate training to financial intermediaries. This function is great for healthy environment in the stock markets and also for the protection of investors.
- Levying fee or any other type of charges to carry out the purpose of the Act.
- Performing functions that may be assigned to it by the Central Government of India.
From the above list we can say that there are a number of functions of SEBI. In a nutshell, Securities and Exchange Board of India has been created to encourage orderly and sound development of the securities market as well as to offer ample investor protection. It aspires to get rid of the unhealthy practices widespread in the Indian capital market and create an atmosphere to facilitate mobilization of resources through the securities market.
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We have tried to list the key functions of SEBI (Securities and Exchange Board of India), if anything is missing please post in the comments section.